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To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago...

To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity.  This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000.  If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation?


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Calculate the semi-annual cost of debt before tax using MS-Excel as follows Function Arguments RATE Nper 20 2 46.25 1075 1000

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